Daily Brief – USA-Canada Trade War

USA-Canada Trade War

In case you think that this is just a storm in a teacup and is calming down, think again: the trade war is hotting up, with Canada imposing like for like tariffs on US goods sold in Canada and 8 out of the 10 Canadian Provinces now boycotting imports of US alcohol. In addition to the tariffs imposed by POTUS in August, the latest move from the White House is a threat to ban sales of Canadian company Bombardier aircraft in the USA unless Bombardier move their aircraft manufacturing to the USA. It is unclear how such a ban would work given that thousands of Bombardier aircraft form a significant part of US airline fleets. Talks between the US and Canada were suspended on August 21 and show no signs of a resumption.

EUR/USD 1.1617.

China

Whether as a result of creative third-party country intermediaries to circumvent US tariffs or simply due to robust growth but China has seen its export of goods abroad grow by 25% in August from a year earlier led by cars and high-tech goods. China is deliberately moving up the value chain from its historic base of cheap exports and is expending effort in expanding its high-tech goods sectors. While other parts of the Chinese economy such as both consumption and investment have been dragged down by the real estate sector downturn, exports are on the up. Last Sunday, China announced that it was injecting USD54 billion into state banks and insurers to stimulate its economy. Plenty for POTUS and President Xi Jinping to discuss on the forthcoming US state visit later this month.

Brent Oil USD 98.16.

Hyperscalers

If you are not familiar with this term here are some examples: Amazon Web Services, Microsoft Azure, Google Cloud Platform, Alibaba Cloud, and Oracle Cloud. Still hazy? A hyperscaler is a massive cloud service provider that operates on an immense scale that allows systems to contract or expand without any deterioration in performance by operating global networks of huge data centres each hosting hundreds of thousands of servers. What all this is about of course is AI and the race to capture market share by offering the most compelling comprehensive service. This requires incredible amounts of funding and this is feeding through to all Bond markets i.e. not just US Dollar based funding. The latest is Sterling and by the time you read this Amazon may be tapping the Sterling Bond market in a range of maturities between 3 and 19 years. Google’s parent, Alphabet raised GBP 5.5 billion in February in 5 separate tranches including a 100-year bond.

GBP/USD 1.3552.

Iceland

Fresh from having decisively rejected the referendum on joining the EU mainly due to its rejection of the EU’s fishing policy, Iceland now has a fresh challenge from the geographically challenged White House incumbent. On Monday night, POTUS posted his version of the truth of a map of the USA which not only included Greenland, Mexico, and Canada (again) but also Iceland. Iceland’s Foreign Minister Thorgerdur Katrin Gunnarsdottir has lodged a formal objection to the map with the US Ambassador to Iceland. Standby for VP JD Vance booking a vacation to Reyjkavik.

GBP/EUR 1.1641.

You Don’t Mess Around With Jim

This day in 1972 Jim Croce the gravelly voiced American singer songwriter had a hit when this album made it to Number One. Hardly a title to woo, the tough love message seemed however to have worked with his fan base. There’s plenty more of this stuff, but here’s a taste of Jim telling it how it is:

Uptown got it’s hustlers
The bowery got it’s bums
42nd street got Big Jim Walker
He’s a pool-shootin’ son of a gun

Yeah, he big and dumb as a man can come
But he’s stronger than a country horse
And when the bad folks all get together at night
You know they all call Big Jim boss
Just because

And they say
“You don’t tug on Superman’s cape
You don’t spit into the wind
You don’t pull the mask off that old Lone Ranger
And you don’t mess around with Jim”

Well, outta South Alabama came a country boy
He said, “I’m lookin’ for a man named Jim”
I am a pool-shootin’ boy, my name Willie McCoy
But down home they call me, ‘Slim'”

Discussion and Analysis by Humphrey Percy, Chairman and Founder

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